2 responses to “Tax to GDP”

1. 

   Thembisa

   12 years Ago

   Can someone please enlighten me: what is the significane of this ratio? Wht does it mean? Is it good if it’s high or vice versa…?
   Thanks.

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2. 

   tom

   12 years Ago

   I am not an economist but the higher the percentage the bigger role the government plays in an economy. Which obviously means tax is a bigger factor. In a communist or socialistic government you would expect the government to be a much higher percentage than with a free market.

   The ratio per say I don’t think tells you how successful a country is but rather about how much the government takes out of that or represents of the overall economy.

   In Zim the ratio is almost 50%. Denmark and Sweden is not far behind and the 40% to 50% range is dominated by “socialistic countries”.

   Ours is equal to the US and south Korea. Changes in this ratio could spell disaster. The fact that it is a given number is not in itself bad.

   An economy is a bit of a balancing act. Too much change either way of this ratio can spell disaster. I bet Zim’s ratios changed very quickly. In Zim you also have to factor in the black market which itself could rival the formal tax paying market which distorts things more.

   For example Brazil at 34% is growing like mad. But a number of Arab countries with no personal tax is … well not doing so well if you start discounting the oil factor.

   High or low is not the issue here I think. It is rather a stat where changes is more important than the number.

   I think our gov. has shown discipline. Many areas of our economy is struggling taking more out of a struggling economy is not good.

   Seen another way the government here is involved in 1 in 4 rand you earn… they can tax more but will that result in better growth for the country? Maybe it will? The opposite may also be true. There are times to stimulate and times not to.

   This ratio would suggest that the gov. kept quiet and did not interfere much recently. The gov. along with its citizens took some pain with the slump. The upside may be that in a year or 3 it may make sense to fiddle a bit. Reducing taxes a bit to try and stimulate the market or to build more Gautrains or something.

   The government bashers will ofcourse point out the governments failures but keep in mind that projects like the gautrain can be very important. Go spend some time in Sao Paulo… they don’t have a gautrain… their traffic is much much worse than ours! They can’t get one! There is no space and way to build it now.

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